The success of the Bank has quite naturally caused neighbouring local authorities to enquire whether they could participate in the scheme. The Birmingham Act of 1919 limits advances for house purchase to the area of the city, and while no such limitation is mentioned in the provisions relating to the savings Bank, it would be stretching the intention if branches were set up in the area of another local authority. The close proximity of Bearwood branch to the Smethwick boundary has caused disappointment to many would-be house purchasers, because of the restrictions, and ways of easing the difficulty have been discussed between the two Councils. West Bromwich also would have liked to co-operate with Birmingham so that assistance in connection with house purchase might be rendered to their townspeople.
The question has been considered of promoting a Parliamentary Bill to give effect to the establishment of branch Banks in the area of an adjoining local authority with the consent, or at the request, of such local authority, and to enable the Bank to make advances on houses situate outside the city area, and as a matter of fact, the Bank Committee were prepared to go forward with clauses on the lines indicated with the support of Smethwick and West Bromwich. The possibility, however, of general legislation being passed has resulted in the contemplated legislation being postponed.
The Smethwick Corporation has pressed the matter upon the Association of Municipal Corporations, and, no doubt, their action hastened the Association giving a considered report on the question of Municipal Banks which is referred to in a later chapter.
Another instance of keen effort was the circularising of other Municipalities by the Warrington Town Council in October, 1925, in which circular was given the resolutions passed by that Council as follows:
That in the opinion of this Council the time has arrived for authority to be given to all county and county borough councils to establish Municipal Banks within their respective areas.
That a copy of this resolution be forwarded to the Ministry of Health and the member for the borough.
That the Association of Municipal Corporations and other local authorities be invited to support the above resolution.
Several Municipalities have promoted Bills in Parliament with the object of securing powers similar to those enjoyed by Birmingham, but the Treasury has been successful in persuading the Municipalities concerned to withdraw their clauses, except in the cases of Wigan and Stoke-on-Trent. In these last-named cases the Bills went before the Local Legislation Committee who decided against the promoters, though only by a very narrow majority in the Stoke case.
The Financial Secretary to the Treasury, in reply to a question in the House of Commons on the 19th November, 1925, said representations in respect of the establishment of Municipal Banks had been received from nineteen town councils as follows: Worcester, Smethwick, Middlesborough, Warrington, Bootle, Wigan, West Bromwich, Cardiff, Rotherham, Walsall, Barnsley, West Ham, Newcastle-upon-Tyne, Coventry, East Ham, Sheffield, Newport, Gateshead and St Helens, but it was not proposed to take any steps in the matter at that time.
The reason which weighed against the repeated efforts to establish more Municipal Banks may perhaps be found in the letter addressed by the Treasury to the Parliamentary agents for the Bristol Corporation, as follows:
18th February, 1926
I am directed by the Lords Commissioners of His Majesty's Treasury to inform you that they must request the omission of Part XVI of this Bill which contains proposals for the establishment by the Corporation of a Municipal Bank.
The only precedent for this proposal appears to be the Birmingham Corporation Act, 1919. In the case of Birmingham, however, a Savings Bank has already been set up under the temporary powers of the Municipal Savings Banks (War Loan Investment) Act, 1916, which permitted the establishment of Municipal Savings Banks for a period expiring three months after the termination of the war. The Birmingham Corporation were the only Corporation to take advantage of these war provisions, and had their powers not been continued by the Birmingham Corporation Act, 1919, it would have been necessary to close down an already existing Savings Bank.
Similar provisions were omitted from the Swansea Corporation Bills of 1920 and 1922, and were disallowed by Parliament in the Wigan Corporation Bill of 1921, and the Stoke-on-Trent Corporation Bill of 1923.
My Lords would conceive that it was the intention of Parliament, while recognising the existing Birmingham Bank, not to encourage the establishment of further Municipal Savings Banks.
The primary object of the Bank would appear to be to take deposits withdrawable on demand and to apply them to housing or other fixed capital expenditure. There are very obvious dangers in borrowing short and lending long in this fashion, and these dangers are much more considerable when the risk is concentrated in one place.
While the provisions in the Bill for regulations to be made by the Treasury go some way to mitigate these dangers, they do not, in their Lordships' opinion, and cannot meet the fundamental danger of small credit institutions nominally supported by public authorities and confined to comparatively small areas.
My Lords would therefore find it necessary to oppose the Bill if the clauses in question are preceded with.
Yours &c
                                                                                                                             O. NIEMEYER
Messrs Dyson, Bell & Co
Without questioning the propriety of the action of the Treasury, whose duty of course it is to exercise the most extreme financial prudence, it may be said that there are very cogent considerations which make for a different view. Some of these are set forth in Chapter 27 of Part Two, in which it will seen how the Birmingham Bank has provided against the dangers foreseen by the Treasury.
On the 10th July, 1923, a 'Local Authorities (Savings and Housing Banks)' Bill was presented to Parliament, seeking to enable local authorities with a population of 150,000 or over, or a combination of local authorities giving that population, to establish and maintain savings and housing Banks. This Bill was based on the clauses in the Birmingham Corporation Act, 1919. The sponsors to this Bill were Mr Leach, Mr Charles Buxton, Sir Ernest Hiley, Mr Morel, Mr Lees-Smith and Mr Snowden.
On the 10th February, 1926, a 'Local Authorities (Municipal Banks) Enabling' Bill was presented, seeking to authorise local authorities, if they think fit, to establish Municipal Banks in their area. These proposals were to apply to any county council, borough council, metropolitan borough council, and urban district council in England after the passing of a resolution by an absolute majority of the members of the council, but the Bill did not apply to Scotland or Northern Ireland. The provisions of the Bill followed on the lines of the Birmingham Act. The sponsors to this Bill were Mr Scurr, Mr Dalton, Mr Beckett, Mr Groves, Mr Mackinder, Mr Taylor, and Mr Ritson.
On the 11th February, 1927, a 'Local Authorities (Banks)' Bill was presented, seeking to authorise local authorities with a population of 150,000 or over, or a combination of local authorities giving that population, to establish Banks, and was a reproduction of the first Bill.
The sponsors to this Bill were: Mr Thomas Williams, Mr Scurr, Mr Dennison, Mr Paling, Mr Palin, Mr Charleton and Mr Parkinson.
In 1922 a deputation from Birmingham visited Scotland to enquire into savings Bank organisations, and the opportunity was seized of conferring with Mr T Johnston (now Member of Parliament for Dundee) regarding the Kirkintilloch Municipal Bank Limited.
Faced with the improbability of Parliamentary sanction being given to small authorities to set up Municipal Banks, like the one in Birmingham, attention was directed to another method. It is understood that Mr Johnston conceived the idea of members of the Town Council running a Bank as a limited undertaking. It appears to have been arranged that the directorship of the Bank should be restricted to membership of the Council, and that a director ceasing to hold office as a member of the Council should also cease to hold office as a director of the Bank. The directors are, apparently, only expected to find a nominal capital and do not receive remuneration for their services.
It was upon these lines that the Kirkintilloch Municipal Bank Limited was established in 1920, with an authorised capital of 2,000 shares of 1/- each. In three years the preliminary expenses in connection with the formation of the Bank were paid off, and the fourth year was commenced free from debt. The money received from depositors is transferred to the Town Council funds, and by this procedure the directors state the Town Council has obtained funds at a low rate of interest which has enabled the ratepayers to reap the advantage in reduced rating. The last report dealing with the year ended 30th April, 1926, shows that the sum of 31,910 6s. 9d. was standing to the credit of 750 depositors, and the accounts bear the signature of a Glasgow firm of chartered accountants.
When the Birmingham deputation visited Scotland, Mr Johnston expressed the view that the Bank at Kirkintilloch would be successful, and that the example would be followed by other authorities. It is significant that there are today similar Banks in operation in Clydebank, Johnstone, Irvine, Peebles, Selkirk, and Motherwell, while other districts are 'toying' with the question of establishing them.
Whatever criticism may be passed upon this form of 'banking', testimony should be paid to those who have sought to provide their fellow-men and women with an organisation approaching as near to a Municipal Bank as they can get. No doubt our Kirkintilloch friends would have preferred a Bank exactly like the Birmingham Bank, with the same guarantee behind it, but, tired of waiting for Parliamentary action, they have demonstrated, once again, that where there is a will there is a way.
Britain's First Municipal Savings Bank
Part Three: Chapter 1